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KARACHI: Habib Bank Limited (HBL) expects its balance sheet growth to remain strong, supported by rising deposits, current accounts and digital banking activity, according to insights shared during an analyst briefing hosted by Arif Habib Limited.
The bank’s current accounts increased 17% sequentially during the quarter. Management attributed the growth to a stronger customer value proposition, incentives and targeted efforts in segments where current deposits play a key role in the cash cycle.
HBL’s loan portfolio remains diversified across multiple segments. Corporate lending accounts for 29% of the total loan book, followed by international business at 22% and Islamic banking at 20%.
Credit quality also remained stable. The infection ratio stood at 4.6% in the first half of calendar year 2026, while the pace of new non-performing loans declined during the second quarter. Management does not currently expect significant additional pressure on the loan portfolio, provided risks from rural flooding and geopolitical developments in the Middle East remain contained.
The bank’s investment portfolio is mainly concentrated in floating-rate Pakistan Investment Bonds, which account for 54% of the portfolio. Treasury bills represent 14%, while fixed-rate Pakistan Investment Bonds account for 24%.
As of June 2026, the overall weighted average maturity of the investment portfolio stood at 0.94 years, while the fixed-rate portfolio had a weighted average maturity of around 2.25 years. Yields on fixed-rate Pakistan Investment Bonds ranged between 11.9% and 12.1%.
HBL’s quarterly performance was affected by pressure on spreads following the policy rate increase in April. However, the impact remained limited as the bank expanded its current accounts, reduced some borrowings and lowered investments.
The bank allowed some investments to mature instead of reinvesting in low-yielding government securities during a period of negative carry. However, it has since started rebuilding its investment portfolio as yields improved and positive carry returned.
HBL also continued to expand and optimise its branch network. The bank added 53 new branches during the first half of 2026 as it seeks to maintain a balance between physical banking and digital services.
Digital activity continued to grow strongly. Mobile banking payments increased 36% year-on-year during the first half of 2026 and crossed Rs7 trillion. Overall digital payments also increased 20% to reach Rs20 trillion.
The bank’s foreign exchange income recorded a significant increase during the quarter. Management attributed the rise to higher trade business and remittance volumes, as well as positioning of its foreign exchange book.
HBL’s cost-to-income ratio stood at 58%. Overall costs increased by 6%, compared with 8% during the same period last year. However, pressure on total income caused by margin compression kept the ratio slightly elevated.
Management expects the cost-to-income ratio to improve as spreads normalise under a stable policy-rate environment.
On monetary policy, HBL’s expectations remain unchanged for now, with the bank closely monitoring geopolitical developments. Management expects the State Bank of Pakistan to resume monetary easing once the current conflict is resolved.
Dividend payouts have also continued to improve. HBL’s payout ratio exceeded 50% during the first half of calendar year 2026. Management reiterated that its dividend strategy focuses on consistency, predictability and improving value for shareholders.
